Deal Dimensions

The measure of global M&A

Cross-border life sciences M&A

Reed Smith partner, James Wilkinson, explores the drivers and challenges for life sciences companies looking to do cross-border deals

Reed Smith partner, James Wilkinson, explores the drivers and challenges for life sciences companies looking to do cross-border deals

Are you seeing a lot of cross-border deals specifically in the life sciences sector coming across your desk? What are the main drivers do you think?

James Wilkinson: Yes. Deal values and volumes have continued to be quite strong and we’ve seen quite a good proportion of cross-border M&A in the sector over the past two years. It’s been a very active area and remains so as companies strive for growth. In a saturated market companies look at different ways of developing product portfolios and diversifying. This can be driven by companies divesting themselves of non-core businesses which become attractive to other parties, refreshing stale product portfolios, or looking at new markets and products. While M&A has been the most active area, joint ventures, strategic alliances, and collaboration agreements have also been popular – and for good reason. As well as sharing costs, these deals help limit risks by forging links with established players or those with complementary businesses.

Given how busy the marketplace is and the number of businesses out there seeking to do deals, has financing been tricky? Are they finding it difficult to fund the deals?

JW: It depends on what type of business you’re talking about – and, to some extent, its location. Traditionally it’s been much easier to raise money for these kinds of businesses in the US where the whole sector has a different profile and probably a different kind of understanding among investors and financiers. But for established businesses with strong product revenues, there’s less need for external financing, and thus less of an issue. However, for earlier stage businesses it has been quite hard. We’ve done some capital markets work this year for early stage pharma companies and the first stage was quite tough in the UK. Once they develop the regulatory approvals and move forward in the whole lifecycle it seems to become easier. There is a growing understanding in the UK of the sector that is, perhaps, making finance easier, and that’s partly helped by government support. Some of the regulatory progression elsewhere in the world is also making it easier - or more beneficial - to support this sector.

Are those very challenging deals for you to be involved in as an adviser due to some of the territories and regulations making them riskier?

JW: Yes, they are riskier for the client in terms of understanding the regulatory environment as well as the political, financial, and legal environment. That’s where we come in, providing regulatory and legal due diligence expertise, and making sure we cover as many of the legal risks and legal liability areas as we can. But having to grapple with different regulations and legal structures in various countries is quite an issue in terms of due diligence– in both the initial and post stages of the deal.The integration process, which is absolutely critical, relies on proper cultural integration and that is a challenge many companies face, not just in this sector but also in any cross-border deal.

Do you feel that your clients and clients generally are paying enough attention to those kinds of issues when they’re going into such deals?

JW: Some don’t pay enough attention to life after the deal. Others are very organised in terms of their deal teams and implementation execution. And they’re also very organised in terms of post deal integration and with regard to the work during acquisition that provides a much smoother outcome.

Have you come across any specific challenges that really stand out from a life sciences perspective, such as cultural, regulatory or compliance related issues?

JW: The registration of IP, and the extent to which it is protected in different jurisdictions, is a particular area of concern. Making sure you have all the right IP protection in place, bearing in mind the regulatory aspects that apply in different jurisdictions, is an issue. Otherwise it’s just understanding different regulatory frameworks and what the particular approval hurdles are. Those are the key issues that we’ve seen in some of the deals we’ve worked on.